How Airbnb Used Data to Secure its $10 Billion Valuation

The growth of Airbnb has received a lot of attention over the past few years, especially since it’s $10 billion valuation. In a recent interview, the company’s head of data science, Riley Newman, explained how data was at the core of its tremendous success.

As Riley explained, “data is the voice of your customer. Data is effectively a record of an action someone in your community performed, which represents a decision they made about what to do (or not) with your product. Data scientists can translate those decisions to stories that others can understand.”

Interestingly, Riley described how improving the search function on the website greatly improved growth and customer satisfaction. In the beginning, Airbnb struggled to give the right guidance to customers, and their strategy was to return “the highest quality set of listings within a certain radius from the center of wherever someone searched.”

However, as more people visited their website, and their data started growing, they replaced this model with a user-data driven one. As Riley described,

“We decided to let our community solve the problem for us. Using a rich dataset comprised of guest and host interactions, we built a model that estimated a conditional probability of booking in a location, given where the person searched. A search for San Francisco would thus skew towards neighborhoods where people who also search for San Francisco typically wind up booking, for example the Mission District or Lower Haight.”

But improving the search function on the website was not the only way data was used. Riley also said that advanced data analytics helped tailor the experience of the website to different demographics. For example, in Asian countries the bounce rate on the home page was considerably higher than others. After analysing the problem, it became clear that users were “being distracted” by clicking on the “Neighbourhood” and were “lost in photos.”

As such, the data science team at Airbnb redesigned the website for users in Asian countries – they removed the “Neighbourhood” links and presented the top travelling destinations in China, Korea, Japan, Singapore, resulting in a 10 percent lift in user conversion.

The message from Airbnb’s growth is that data can be a huge resource for startups and businesses trying to improve their websites. Through leveraging data, key website functions can be analysed and improved, ultimately generating more revenues and enhancing customer experience.